From the outside, Alago looks like a business that employs a lot of staff.

The Bristol-based firm designs, makes and sells heated gloves for sport and leisure and has distributors in five countries.

In fact, until recently the business had just one employee: its founder Tony Curtis. That’s because virtually every aspect of the business is outsourced, including manufacturing, accounts and bookkeeping, warehousing, product design, posting and packaging, barcodes, web development and research and development. Even the business office address is virtual, with the job of answering the phone outsourced to a telephone answering company.

Curtis, who came up with the idea for his gloves after seeing his son’s hands turn blue playing rugby, said: “We outsource pretty much everything. It is much more cost-effective.

“We are a small company so we can’t afford to have staff dedicated to lots of different areas, and it would be difficult to find one member of staff to do everything that is needed. It is much easier to use outsourcing to get the bits you need, whenever you need it.”

With the exception of the manufacturing, which is done in Asia, most functions have been outsourced locally to businesses in Bristol and through freelance sites such as Elance.com.

Once upon a time, pretty much the only things a small firm could outsource were its bookkeeping and office cleaning. Not anymore. Now, thanks in part to the growing number of professionals offering their services on a freelance basis, virtually every element of a business can potentially be outsourced.

This shift is opening up major opportunities for small businesses keen to grow without the financial burden and commitment of taking on lots of staff.

As Emma Jones, founder of Enterprise Nation, the home business network, said: “My advice to any small business is 'focus on what you do best and outsource the rest’ and it’s becoming increasingly straightforward to do this. Outsourcing helps you stay nimble and keeps overheads low.”

The benefits of outsourcing are threefold: you only pay for services as you need them; you get access to expertise that may not otherwise be available to you; and it frees up your time to focus on the things you do well, while offloading the tasks you perform badly.

Take designing a product label. You can either spend entire weekends surrounded by bits of paper and felt-tip pens, tearing your hair out, or you can hire a freelance designer to create one for you via an outsourcing website such as 99designs.co.uk. At £139 for a design delivered within seven days, that’s a lot of headache removed for little cost.

Chris Pichon, chief executive of Wenta, the enterprise agency for Hertfordshire and Bedfordshire, said that too many small-business owners try to do everything themselves, often to ill-effect.

“How many small-business owners spend ages trying to upload a new piece of software to their computer, when actually they could pay somebody £150 to do it and be immediately up and running instead of spending three days trying to get it working? I think outsourcing is absolutely essential for a small business,” he said.

David Hathiramani is the co-founder of online bespoke tailor business A Suit That Fits, which outsources all of its manufacturing to tailors in Kathmandu, Nepal.

He said that outsourcing has given the London-based firm, which has a turnover of £3m, access to tailoring skills that would never have been possible otherwise. “There is a huge skill base in Nepal and Nepalese tailors are serious and conscientious,” he said.

The one downside to the arrangement, at least initially, was the difficulty of communicating across a cultural divide. Hathiramani and his partner Warren Bennett quickly discovered, for example, that the Nepalese idea of a fitted suit was considerably baggier than the UK ideal.

“There is a learning curve that you have to go through with anyone you are outsourcing with.”

So, how do you go about getting outsourcing right?

The first step is to select your outsourcing provider by reputation or recommendation – you need them to be good.

Next, keep any arrangement as flexible as possible so you can make changes if you need to. Don’t sign long contracts and review the arrangement regularly to ensure that the provider is continuing to deliver.

Get everyone to sign non-disclosure agreements to protect your business. Be ultra-cautious about any arrangement that puts your outsourcing provider in direct contact with your customer. They will effectively be representing your firm, and if they muck it up, it will reflect badly on you. It is far better to remain as the interface between the two, and in control.

Finally, keep an eye on costs – with a bit of luck your small business will grow so much that one day it really will be big enough to justify hiring staff of its own.

Rachel Bridge is a journalist and author specialising in entrepreneurship and SMEs. Her fifth book, How to start a business without any Money, is out now.